$33,000 of pension exempt

Motives questioned

governor's spokesman calls it 'pandering'

Campaign 1998

Republican gubernatorial candidate Ellen R. Sauerbrey will announce a plan tomorrow that diverts much of her long-favored across-the-board tax cut into the pockets of Maryland retirees.

Contending that high income taxes have led to an "exodus of seniors" from the state, Sauerbrey will propose a plan that would make up to $66,000 of a retired couple's Social Security and pension income free from state taxes after they turn 65.

A campaign spokesman for Democratic Gov. Parris N. Glendening, her likely opponent in November's general election, described the proposal as "pandering." But a leading Republican senator praised the initiative as a "wonderful" way to use Maryland's budget surplus.

Sauerbrey said the break for the elderly would come from the 14 percent income tax reduction she has proposed to add to the 10 percent cut approved by Glendening.

The Republican candidate acknowledged that the initiative would mean a smaller across-the-board rate-cut than she previously had supported. But she could not say how much smaller.

A campaign spokesman later added that several other tax cut proposals -- including cuts in the inheritance tax and real-estate settlement taxes -- would also be accounted for by lowering the across-the-board reduction.

Democrats immediately questioned the motives behind Sauerbrey's policy shift -- one of many she has made in crafting a far different campaign message from the one that almost carried her to victory in 1994. That year she came within about 6,000 votes of victory -- running on a promise to cut income taxes by 24 percent.

House Speaker Casper R. Taylor Jr. said the new tax proposals represent a "sea change" in Sauerbrey's approach.

"Up to this point, Ellen Sauerbrey's very centerpiece has been an across-the-board, 24 percent reduction in the income tax rate -- and I underline the word rate," said Taylor.

The speaker noted that business advocates -- backed by Sauerbrey -- have long made the case that rate reductions would spur economic development by making the state more attractive to companies.

"It appears as though she is piecemealing her agenda as she goes along. It indicates to me that she is responding to the politics of the campaign," said Taylor, a Cumberland Democrat.

Sauerbrey's proposal was also dismissed by her opponent in the Sept. 15 Republican primary. "The elderly I talk to are

more interested in a property tax cut than an income tax cut," said Howard County Executive Charles I. Ecker.

Sauerbrey said yesterday that she wants to make the first $33,000 of an individual's retirement earnings exempt from state income taxes after age 65. Maryland now excludes roughly the first $15,000 of Social Security and pension income from taxation.

Lucrative for couples

The exemption could be especially lucrative for affluent couples who are retired from two careers. They could see up to $66,000 of their income excluded from state taxation. The Sauerbrey campaign estimated that the change would affect 234,000 tax returns -- with savings of up to $800 per individual and $1,600 per couple.

$210 million

Sauerbrey said the earliest the cut could go into effect would be fiscal 2001, adding that it might have to be phased in. She estimated that the exemption would cost $210 million in lost revenue the first year it was fully in effect.

The GOP candidate, who has also been promising increased state spending on such initiatives as hiring 1,001 new teachers, gave only general answers when asked how she planned to make up the revenue. She said she expects to cut waste and to have Maryland's economy booming under her administration.

Surplus committed

But Frederick W. Puddester, Glendening's budget secretary, said Sauerbrey will not be able to dip into the Maryland budget surplus to make up for the cuts without imperiling the state's Triple-A bond rating. He said most of that surplus is committed to maintaining that rating and paying for the 10 percent tax cut already adopted.

Sauerbrey said Maryland needs to cut taxes on the elderly to stem a migration of retirees to other states with a lower tax burden. She said Marylanders have expressed concern that the exodus is forcing grandparents to move away from their children and grandchildren.

Glendening declined to comment on the Sauerbrey proposal, but campaign spokesman Peter Hamm said it was "troubling that she's doing so much pandering at this point."

"Only Ellen Sauerbrey would say that older Americans move to Florida because of the tax structure," Hamm said. "With the kind of promises she's been making, she should just say she'll change Maryland's climate to be like Florida's."

But Senate Minority Leader F. Vernon Boozer, a Baltimore County Republican, called the plan "wonderful." He said many retirees from his part of the state are moving across the state line to take advantage of lower taxes in Pennsylvania.

"It's a big incentive when you don't have to pay 5 percent of your retirement," Boozer said.